shine trader live reports:
On Thursday local time, Fed chairman Powell ordered a comprehensive review of the ethical rules related to the management of financial assets and trading activities by senior Fed officials. Some analysts said that the internal regulatory rules of the Federal Reserve decades ago may be rewritten.
Stock trading of senior Fed officials shocked Wall Street
According to the financial disclosure recently submitted by the 12 regional Fed of the Federal Reserve, during the epidemic last year, some senior officials of the Federal Reserve conducted market transactions of up to $1 million while taking advantage of the significant relaxation of monetary policy.
For example, Robert Kaplan, President of the Federal Reserve Bank of Dallas, bought and sold the stocks of apple, Amazon, Alibaba, Johnson & Johnson and other companies with millions of dollars, and also invested in Floating Rate Bond ETF (flot).
Eric Rosengren, President of the Federal Reserve Bank of Boston, made several transactions in the real estate investment trust. Previously, he had been sharply critical of the risk of U.S. real estate.
For the above news, the Dallas fed and the Boston fed both claimed that their investment complied with the Fed’s ethical rules and promised to sell all stocks before September 30 and use the proceeds for passive investment. Neither of them will buy or sell stocks during their tenure as chairman of the regional Federal Reserve.
In view of the possibility that Fed officials may obtain information through their positions, so as to obtain investment benefits, the next stock speculation of Fed officials has aroused great concern on Wall Street. This week, Democratic Senator Elizabeth Warren from Massachusetts wrote to all 12 regional Federal Reserve Banks urging them to prohibit senior officials from holding shares.
In particular, Warren wrote in his letters to Kaplan and Rosengren: “when the Fed is dealing with the risks of the economy and the financial system, you and your colleague Rosengren (Chairman of the Boston fed) do a lot of trading in personal stocks and real estate investment trusts.”
Powell: comprehensive review!
As executives of public institutions responsible for monitoring U.S. inflation and the job market, Fed officials can first know the direction of monetary policy. Even if they claim that their trading behavior is ethical, it is not enough to calm the doubts of the market.
For the large amount of stock trading by senior officials of the Federal Reserve, Federal Reserve Chairman Powell issued an instruction on the 16th, requiring a “new and comprehensive” review of the behavior of senior officials of the Federal Reserve in holding and trading stocks.
Over the past year, the Federal Reserve has adopted a large number of unconventional easing policies. Until now, the Federal Reserve still maintains a bond purchase scale of $120 billion a month. These measures make the market suspect that they may be related to the interests of Federal Reserve officials.
Fed rules may be rewritten
“Stock speculation by officials within the Federal Reserve will damage the credibility of the Federal Reserve and may weaken the implementation effect of the Federal Reserve’s policies. In order to maintain the credibility of the Federal Reserve, it is expected that the relevant internal performance standards will be significantly tightened.” a senior macro researcher of a commercial bank told the Shanghai Securities Journal.
The Federal Reserve explicitly prohibits officials from trading before and after the FOMC meeting that publishes market sensitive information, requires them to hold securities for at least 30 days, and prohibits Federal Reserve officials from holding bank stocks or funds whose assets are concentrated in the financial sector supervised by the Federal Reserve. The Fed’s internal rules also require that officials avoid conflicts of interest or use their central bank positions for personal gain.
However, the above rules were formulated decades ago. In view of the increasing influence of the Federal Reserve, how to guide it to adapt to the current market situation has become the expectation of the industry.
“I don’t know whether this is a failure to enforce the rules or a failure of the rules,” said Aaron Klein, an economic researcher at Brookings University. More and more evidence shows that the supervision rules of local bank governors of the Federal Reserve are being broken.
article links：The first senior Fed official to know monetary policy
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